Check Out ITM Covered Calls Options Trade on Lowes (LOW)

Covered Calls Advisor's in the money options trades have a good track record and offer a way for dividend investors to diversify their options premiums income strategies.

By Donald E. L. Johnson

Cautious Speculator

• Covered Calls Advisor buys LOW and sells ITM short duration calls.

• LOW has decently bullish momentum. It is up 5.2% year to date and 11.6% in the last three months.

• Doing two or three of these trades a month is working pretty well for me.

Jeff Partlow at Covered Calls Advisor just posted an in the money (ITM) covered calls trade on Lowe’s Companies (LOW).

My trades

I did a buy write on LOW. I bought LOW at $209.70. Then I sold LOW 2.3.23 $202.50 calls (delta .74, OTM probability 27.69% for $9.25 per share on a 100-share options contract. If the trade works as intended, my annualized RoR will be about 31%.

Be sure to read Jeff’s post to understand the trade if you decide to do it.

LOW is trading at 18.5 times free cash flow, and it is fairly valued, according to StockRover.com. The mean consensus target price is $238.09, the high target is $300 and the low target is $159. Support is $196 and resistance is about $216. The 2% annual dividend is the equivalent of about a 10% annualized yield on the 17-day trade.

I also bought back Kinder Morgan (KMI) 1.20.23 $19 calls for $0.13, which is what I sold them for 27 days ago. KMI reports its fourth quarter and 2022 earnings tomorrow, and I don’t want to own the calls on the day the company posts its results and offers new guidance. Depending on the earnings report, I’ll probably sell February calls in a few days. I’m keeping my KMI 1.20.23 $16.50 strike puts because I don’t think there is much risk that the stock will drop to the strike. Also, I will take the additional shares if they are put (assigned) to me.

LINKs:

Home Page. See previous articles on other trades, stocks and watch lists. If you read several of these articles, you’ll learn how my strategy is meant to work. No guarantees. Links to useful web sites are on the lower right corner of the home page. Scroll down.

Follow @realDonJohnson on twitter.com.

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Beware. Like all investing, trading stocks and options is risky. I’m an active private speculator who trades covered calls and sells puts on stocks for my accounts. I am not a professional analyst nor a financial advisor. I don't take and won't take responsibility for how other people trade. This article is for educational purposes only. It is not advice. The data presented looked accurate at publication time except for intra-day fluctuations, but I can’t guarantee the accuracy. Traders should do their due diligence. I reserve the right to trade any of the listed stocks and options at any time. I receive no compensation for producing this content nor for any links.